{"id":40318,"date":"2025-10-14T13:55:55","date_gmt":"2025-10-14T13:55:55","guid":{"rendered":"https:\/\/certifeka-edu.com\/programs\/finance-for-strategic-managers-accounting-professional-certificate-2\/lessons\/lesson-8-statement-of-cash-flows-formats-2\/"},"modified":"2025-10-14T13:55:55","modified_gmt":"2025-10-14T13:55:55","slug":"lesson-8-statement-of-cash-flows-formats-2","status":"publish","type":"lesson","link":"https:\/\/certifeka-edu.com\/ar\/programs\/sample-course\/lessons\/lesson-8-statement-of-cash-flows-formats-2\/","title":{"rendered":"Lesson 8: statement of cash flows formats"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" width=\"96\" height=\"114\" src=\"https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/04\/logos-png-01-296x57-1.png\" alt=\"\" srcset=\"https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/04\/logos-png-01-296x57-1.png 96w, https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/04\/logos-png-01-296x57-1-10x12.png 10w, https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/04\/logos-png-01-296x57-1-42x50.png 42w\" sizes=\"auto, (max-width: 96px) 100vw, 96px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n<h2>Lesson 8: Understanding Cash Flow Statement<br \/>\n<\/h2>\n<h3>Statement of cash flows formats<br \/>\n<\/h3>\n<h5>There are 2 formats for the operating activities section of the statement of cash flows:<\/h5>\n<details id=\"e-n-accordion-item-1200\" open>\n<summary data-accordion-index=\"1\" tabindex=\"0\" aria-expanded=\"true\" aria-controls=\"e-n-accordion-item-1200\" >\n\t\t\t\t\t Indirect method<br \/>\n\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M416 208H32c-17.67 0-32 14.33-32 32v32c0 17.67 14.33 32 32 32h384c17.67 0 32-14.33 32-32v-32c0-17.67-14.33-32-32-32z\"><\/path><\/svg><br \/>\n\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M416 208H272V64c0-17.67-14.33-32-32-32h-32c-17.67 0-32 14.33-32 32v144H32c-17.67 0-32 14.33-32 32v32c0 17.67 14.33 32 32 32h144v144c0 17.67 14.33 32 32 32h32c17.67 0 32-14.33 32-32V304h144c17.67 0 32-14.33 32-32v-32c0-17.67-14.33-32-32-32z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t<\/summary>\n<h5>The indirect method is a method used in financial reporting in which the statement of cash flows begins with the net income before it is adjusted for the cash operating activities before an ending cash balance is achieved.<\/h5>\n<h5>The indirect method uses accrual accounting information in preparing the statement of cash flows for an accounting period.<\/h5>\n<h5>Think: Start with net income and then make adjustments.<\/h5>\n<\/details>\n<details id=\"e-n-accordion-item-1201\" >\n<summary data-accordion-index=\"2\" tabindex=\"-1\" aria-expanded=\"false\" aria-controls=\"e-n-accordion-item-1201\" >\n\t\t\t\t\t Direct method<br \/>\n\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M416 208H32c-17.67 0-32 14.33-32 32v32c0 17.67 14.33 32 32 32h384c17.67 0 32-14.33 32-32v-32c0-17.67-14.33-32-32-32z\"><\/path><\/svg><br \/>\n\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M416 208H272V64c0-17.67-14.33-32-32-32h-32c-17.67 0-32 14.33-32 32v144H32c-17.67 0-32 14.33-32 32v32c0 17.67 14.33 32 32 32h144v144c0 17.67 14.33 32 32 32h32c17.67 0 32-14.33 32-32V304h144c17.67 0 32-14.33 32-32v-32c0-17.67-14.33-32-32-32z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t<\/summary>\n<h5 style=\"color: #000080;\">Aking the definition of cash flow at face value, the direct method calculates cash flow by adding up all of your individual cash transactions, minus cash income from cash expenses over the same period. This information can be taken directly from your business&#8217;s bank statements for the cash flow period.<\/h5>\n<\/details>\n<h5>The indirect method is a method used in financial reporting in which the statement of cash flows begins with the net income before it is adjusted for the cash operating activities before an ending cash balance is achieved.<\/h5>\n<h5>The indirect method uses accrual accounting information in preparing the statement of cash flows for an accounting period.<\/h5>\n<h5>Think: Start with net income and then make adjustments.<\/h5>\n<h5 style=\"color: #000080;\">Aking the definition of cash flow at face value, the direct method calculates cash flow by adding up all of your individual cash transactions, minus cash income from cash expenses over the same period. This information can be taken directly from your business&#8217;s bank statements for the cash flow period.<\/h5>\n<h3>Indirect and Direct Methods:<\/h3>\n<h5>Both methods the direct and indirect methods arrive at the same amount for &#8220;net cash provided by operating activities.&#8221; However, they differ in how they arrive at the amount.<\/h5>\n<h5>A lot of companies prefer the indirect method for two reasons<\/h5>\n<ul>\n<li>\n\t\t\t\t\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 512 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M173.898 439.404l-166.4-166.4c-9.997-9.997-9.997-26.206 0-36.204l36.203-36.204c9.997-9.998 26.207-9.998 36.204 0L192 312.69 432.095 72.596c9.997-9.997 26.207-9.997 36.204 0l36.203 36.204c9.997 9.997 9.997 26.206 0 36.204l-294.4 294.401c-9.998 9.997-26.207 9.997-36.204-.001z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t\t\t\t\tIt is easier and less costly to prepare\n\t\t\t\t\t\t\t\t\t<\/li>\n<li>\n\t\t\t\t\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 512 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M173.898 439.404l-166.4-166.4c-9.997-9.997-9.997-26.206 0-36.204l36.203-36.204c9.997-9.998 26.207-9.998 36.204 0L192 312.69 432.095 72.596c9.997-9.997 26.207-9.997 36.204 0l36.203 36.204c9.997 9.997 9.997 26.206 0 36.204l-294.4 294.401c-9.998 9.997-26.207 9.997-36.204-.001z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t\t\t\t\tIt focuses on the difference between net income and net cash flow from operating activities.\n\t\t\t\t\t\t\t\t\t<\/li>\n<\/ul>\n<h5>The FASB has expressed a preference for the direct method but allows the use of either method.<\/h5>\n<h5>The indirect method adjusts net income for items that do not affect cash.<\/h5>\n<h5>A great majority of companies use this method.<\/h5>\n<h5>Companies favor the indirect method for two reasons:<\/h5>\n<ul>\n<li>\n\t\t\t\t\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 512 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M173.898 439.404l-166.4-166.4c-9.997-9.997-9.997-26.206 0-36.204l36.203-36.204c9.997-9.998 26.207-9.998 36.204 0L192 312.69 432.095 72.596c9.997-9.997 26.207-9.997 36.204 0l36.203 36.204c9.997 9.997 9.997 26.206 0 36.204l-294.4 294.401c-9.998 9.997-26.207 9.997-36.204-.001z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t\t\t\t\tit is easier and less costly to prepare\n\t\t\t\t\t\t\t\t\t<\/li>\n<li>\n\t\t\t\t\t\t\t<svg aria-hidden=\"true\" viewbox=\"0 0 512 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M173.898 439.404l-166.4-166.4c-9.997-9.997-9.997-26.206 0-36.204l36.203-36.204c9.997-9.998 26.207-9.998 36.204 0L192 312.69 432.095 72.596c9.997-9.997 26.207-9.997 36.204 0l36.203 36.204c9.997 9.997 9.997 26.206 0 36.204l-294.4 294.401c-9.998 9.997-26.207 9.997-36.204-.001z\"><\/path><\/svg><br \/>\n\t\t\t\t\t\t\t\t\t\tit focuses on the differences between net income and net cash flow from operating activities.\n\t\t\t\t\t\t\t\t\t<\/li>\n<\/ul>\n<h5>The direct method shows operating cash receipts and payments.<\/h5>\n<h5>It is prepared by adjusting each item in the income statement from the accrual basis to the cash basis.<\/h5>\n<h5>The FASB has expressed a preference for the direct method but allows the use of either method.<\/h5>\n<p>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"269\" height=\"241\" src=\"https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/08\/Usage.png\" alt=\"\" srcset=\"https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/08\/Usage.png 269w, https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/08\/Usage-13x12.png 13w, https:\/\/certifeka-edu.com\/wp-content\/uploads\/2025\/08\/Usage-56x50.png 56w\" sizes=\"auto, (max-width: 269px) 100vw, 269px\" \/><\/p>","protected":false},"comment_status":"open","ping_status":"closed","template":"","class_list":["post-40318","lesson","type-lesson","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - 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